Erdogan Says Graft Allegations Undermine Turkey’s Economy

Turkish Prime Minister Recep Tayyip Erdogan said graft allegations against government officials and businessmen are hurting the economy, escalating a counterattack on what he described as a “gang” within the state bureaucracy.

Erdogan, 59, has given almost 10 public speeches in the past two days in an effort to rally his supporters against corruption probes that implicated the government and prompted a cabinet reshuffle. In one speech after another, he sought to defend his record in office, saying at one point that his government won’t “forgive anyone involved in graft, even if he is my child.”

The investigations, which became public on Dec. 17, have cost the economy billions of dollars, the premier said in a speech in the western town of Akhisar. Businessmen who were awarded projects such as the third airport in Istanbul and a rail tunnel under the Bosporus Strait may now struggle to secure loans due to alleged irregularities in tenders, he said.

The probe, which Erdogan’s supporters blame on a powerful cleric who fell out with the premier this year, may determine the politician’s legacy after 10 years in power, which saw the size of the Turkish economy more than triple in nominal terms. The nation’s stock, currency and bond markets fell last week.

Anger over the scandal sparked protests for a second day yesterday in several areas, including the Aegean city of Izmir, where police used tear gas and water cannons to prevent demonstrators from reaching a local branch of Erdogan’s party, the state-run Anatolia news agency said.

Gezi Park

The protests were reminiscent of anti-government demonstrations that roiled the country in June over opposition to redevelopment of Gezi Park in Istanbul. Police detained 70 people in Istanbul on Dec. 27, Anatolia reported.

“They said Gezi and smashed windows, now they say corruption and are smashing windows again,” Erdogan said. “Such games won’t be successful. We will give the necessary response on March 30,” when local elections are scheduled. He accused opposition parties of “treason” for waging a campaign to destabilize the government together with financial speculators.

The prime minister increased his appearances after a top judicial body blocked his order requiring the government to be notified of investigations, deepening the standoff with the judiciary. That ruling was unconstitutional, Erdogan said. Opposition lawmakers countered that the prime minister was undermining the charter.

Investigation Urged

“The government isn’t going after thieves,” Kemal Kilicdaroglu, head of the main opposition Republican People’s Party, said yesterday in the Black Sea port city of Samsun. “It’s chasing prosecutors and judges, and telling them to not catch the thieves.”

He called Erdogan “the prime minister of the corrupt,” and his party urged President Abdullah Gul to probe the allegations.

The lira weakened as much as 2.3 percent to 2.1764 against the dollar on Dec. 27, before trading at 2.1549 in Istanbul. The Borsa Istanbul 100 Index fell 1 percent at the close to 63,885.22, the lowest since August 2012. Two-year bond yields climbed above 10 percent for the first time since August.

Turkish Finance Minister Mehmet Simsek said on his Twitter account that the economy will be quick to recover from what he called a soft-coup attempt. “We’ll disappoint doomsday sayers again,” Simsek said.

‘Significant Adjustment’

The weakening currency will lead to a “significant adjustment” of the current account deficit, though will have a limited effect on inflation, he said. Any economic slowdown is “likely to be temporary,” Simsek said.

The corruption investigation has become the battleground in a struggle between the government and followers of a U.S.-based imam, Fethullah Gulen, who is blamed by Erdogan’s supporters for instigating the crackdown. The cleric broke with Erdogan recently, ending a partnership that has helped sustain the single-party government since 2002.

“Those trying to set up a parallel state within the state will find us against them,” Erdogan said. He chided the prosecutor, Muammer Akkas, who was removed from the graft investigation. “Are you a prosecutor or a member of an organization?” Erdogan said yesterday.

Turkish police have also been caught in the struggle between Erdogan and Gulen. About 500 police chiefs were dismissed from their posts and reassigned after the sons of three ministers were among dozens detained. All three ministers were replaced by Erdogan last week.

Army Statement

European Union Enlargement Commissioner Stefan Fule said in a statement that he was concerned by “the removal of a large number of police officers from their duties” and urged Turkey to “take all the necessary measures to ensure that allegations of wrongdoing are addressed.”

Turkey’s new EU Affairs Minister Mevlut Cavusoglu was quick to respond. The EU shouldn’t reach “prejudiced conclusions while interpreting domestic political developments in Turkey,” he said.

Turkey’s military, which as recently as 1997 pressured the country’s first Islamist prime minister to step down, has steered clear of the fray.

“The Turkish Armed Forces in no way wants to be involved in political debates,” the military said in a statement.

The army, though, is asking for a retrial of hundreds of its members who were jailed in coup-plot cases, Milliyet newspaper said yesterday, citing what it said were remarks by General Necdet Ozel, chief of the military, during a closed-door National Security Council meeting Dec. 26.

Telephone calls by Bloomberg News to the military’s press office weren’t answered.